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Even with the office vacancy rate climbing in New Hampshire, rents are not following the traditional decline

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The direction the New Hampshire office market will take has been questionable due to, and since, the pandemic. Many thought companies would leave their office space, which would lead to a spike in the overall vacancy rate. Yet, even before the pandemic began, really since the third quarter of 2019, the market saw a slow climb in its vacancy rate. Fast-forward to the end of the first quarter of 2022 and the vacancy rate sits at 11.3%, roughly 4.0% higher than three years ago.

The Class A category remained almost unchanged this quarter when looking year-over-year, as its vacancy rate fell by 0.3% and ended the quarter at 11.6%. 

On the other hand the Class B category saw a large climb in its vacancy rate, rising by 2.3% year-over-year. Ending the quarter with a vacancy rate of 11.9%, Class B rents stabilized year-over-year seeing only a slight increase of 0.2% ($0.40 PSF). The Concord and Nashua submarkets saw the largest shift in Class B vacancy rates rising by over 6.0%. 

Office to Multifamily Conversion
With the vacancy rates in most submarkets rising, notably in the Manchester submarket, landlords are looking for a better way to use empty office space. In 2021, the Manchester office submarket had 101,000 SF of mostly vacant office space converted to multifamily use.

As this is a significant amount of space, it doesn’t even include any of the proposed or approved conversions in Manchester. Some projects include:

  • Eight floors at 1000 Elm Street being converted to 134 multifamily units
  • The 184,000 SF flex building that will be torn down to make way for up to 260 units on W Auburn Street 
  • The 160 affordable housing units to be built at the old police station on Chestnut Street
  • Plans are before the planning board to convert the five-story, Class C office building at 25 Lowell Street to 50 residential units
  • The two-story, 10,530 SF office building at 530 Chestnut Street could be converted into 12 multifamily units
  • 42 Bridge Street, the former Member’s First Credit Union,  has a proposal before the planning board to convert the 19,200 SF building into 14 dwelling units

It is not surprising for an area like Manchester to see vacant or older space undergoing residential conversion when it is in desperate need of housing. This trend is not just happening in the Manchester submarket. In Merrimack, the former Brookstone headquarters on Innovation Way has been vacant for over four years and there are plans to convert the 100,500 SF office building into 90 residential units.

The question is, how will this impact the office category? If more than 10% of the vacancy in the Manchester, Concord, and Nashua submarkets are converted to residential, it would drop the vacancy rate significantly. Typically, when there is less office activity, rents stabilize and potentially begin to fall. However, if vacancy rates drop due to a lower supply, asking rents may rise in certain submarkets or categories of space. 

It will take time for the office market to feel the impact of this trend given the uncertainty of the timing for the proposed conversions to take place. For now, due to office inventory being removed as it is converted to multifamily, the market looks to be stabilizing.  

At Colliers, we internally track over 23.8 million SF of office space across 6 submarkets. Our inventory includes buildings and condominiums 10,000+ SF and are classified as Class A, B, or C. 

Q1 Office

Even with the office vacancy rate climbing in New Hampshire, rents are not following the traditional decline

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Kristie Russell

Research Manager | New Hampshire & Maine

Manchester, NH

As the Research Manager, I serve as the point person for gathering and reporting on market knowledge for the New Hampshire and Maine offices. 

I collaborate with our brokers to deliver in-depth analyses of current market conditions and trends for their clients. Using various in-house and online resources, I maintain our proprietary database, which includes detailed property statistics, sale and lease comparables, market contacts, and tenant activity within New Hampshire and Maine. 

With this data, I develop best-in-class research reports, market analyses, and market insight to ensure our clients capitalize on this research as they contemplate business decisions that significantly affect their bottom line.

Prior to becoming the Research Manager, I was a Marketing Specialist at Colliers for five years. In this position I used Adobe software, including InDesign and Photoshop, to implement marketing strategies in support of our brokers. 

My responsibilities included creating property marketing collateral - such as flyers, brochures, ads, and proposals - as well as maintaining listing databases and our exclusive listing inventory. In addition to the property marketing, I assisted in coordinating special events, handling public relations and advertising, creating brand awareness, and developing our SEO and social media campaigns. 

Additionally, I am a licensed real estate salesperson in New Hampshire.

Prior to beginning my career in commercial real estate, I worked for Gallery Marketing Communications, LLC as a graphic design artist. During my time there, I used Adobe software to design brochures, flyers, business cards, and postcards, among other marketing materials. I also worked for Gatehouse Media, Inc as a freelance sports journalist, covering high school games in Massachusetts.

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